According to the March 26, 1998 decision of the U.S. Second Circuit Court of Appeals, the complaint was dismissed by the trial court February 18, 1997 and on July 3, 1997, the court denied Plaintiff's motion for reargument or leave to file an amended complaint. The case was appealed to the Second Circuit, which affirmed the district court's dismissal, having concluded that prospectus was not materially false and misleading.
The original complaint asserts claims against the fund, individuals controlling the fund, and the underwriters of the public offering under section 11 of the Securities Act of 1933 and the common law. The complaint alleges that the fund's prospectus contained material misrepresentations in violation of section 11 of the Securities Act of 1933 and that the failure of the fund to take action in light of the existence of a substantial discount in the fund's stock's net asset value over an extended period of time is a breach of the fund's promises set forth in the prospectus. More specifically, the complaint alleges that the registration statement and prospectus falsely represented that if the fund's shares traded at a significant discount to their net asset value for an extended period of time. Putnam Investment Management Inc., the fund's manager, would consider a repurchase program and/or the fund would put conversion to an open-end fund to a vote of the fund's shareholders. Since September 1995 a discount of 10% or greater (at times as great as 16%) from the net asset value of the fund has existed, but no action has been taken by defendants to alleviate it, contrary to the fund's representations in the prospectus.